Investing in a rental Property VS. Airbnb

[Natalie Reese]

Hello all,

I am a young investor and have been saving up for my next investment. I currently own a home that I rent out. I am curious to know if it is wiser to buy a home to rent out to tenants or to buy a home in a good destination to rent out on Airbnb. ? 

Currently, invest in Georgia ( Woodstock area) and am wondering about Seattle, Portland, Lahaina, and Atlanta areas. If you have any thoughts or tips I would love to learn! 

Thank you!

[Rick Baggenstoss]

@Natalie Reese I think you need more data to decide.  Check Airdna.co for your area.  Find houses similar to yours, e.g. Beds, finish level, location, .. that rent frequently.  That will give you a gross rent.  It will probably seem like a very big number, but don't stop there.  Then, start subtracting monthly expenses like:

• cleaning ($500+/mo/unit), - the rest is nothing compared to this item. hard to manage and a huge monthly expense.
• Vacancy - Rent rate and occupancy rate go hand-in-hand - monitor REVPAR per weekday/weekend/month to really know how you're doing
• utilities including wifi and surveillance - ideally with remote monitoring and locked in at reasonable temps, smoking/noise/party detectors
• perishable supplies (paper, coffee, soaps, etc.),
• linens (towels, sheets, comforters - they need to be thrown out every 3-12 months),
• Lawn care - not just mow and blow, but garden beds too
• Pest control - 80/qtr
• furniture - it doesn't last forever.
• Maintenance - normal + changing light bulbs, fixing furniture, loose doorknobs, etc.
• Administrative software - dynamic pricing engine, guest communication system
• Hosting fees - this is not a passive model. Whether it's your time or a co-host, a % of rent comes off the top for marketing, communication with guests, coordinating suppliers, frequent inspections.
• Marketing fees - Airbnb, VRBO, Booking.com, ... or your direct marketing all have fees for the booking.
• Leases/mortgage - not all are owned but might be master leased or subleased.
• Taxes - property and business related
• Insurance 

You'll have your net rent for Airbnb.  Net your expenses out of your longer-term rental scenario too. See how they compare.  

Do some research among other active hosts in your area and see what they think about your house as short term or moderate term, e.g. corporate rental or travel nurses.  Maybe you have something special, maybe not. 

If you want to pursue short term rental, then I hope you'll pursue multiple local short term rentals.  It's about as easy to manage 10 as it is to manage 2. 

Good luck,

Rick